This document provides a comprehensive overview of Facilities and Administrative (F&A) costs—often referred to as indirect costs—associated with federally sponsored university research in the United States. F&A costs represent essential expenditures required to create and maintain the infrastructure and support needed for academic research, such as laboratories, compliance efforts, and research safety, which cannot be directly itemized for individual projects. The federal government reimburses universities for a portion of these costs because universities incur them specifically to conduct research on the government’s behalf. Typically, 25-33% of a federal research grant covers F&A costs, while the remainder supports direct research expenses. However, universities consistently contribute substantial institutional funds—covering about 25% of total academic R&D—towards research, often exceeding federal reimbursement, especially due to capped reimbursement rates for administrative components since 1991.
The document clarifies that universities do not profit from F&A reimbursements; instead, they subsidize unreimbursed expenses, which have grown significantly due to increased regulatory and compliance demands. Compared to other government research performers such as federal or industrial laboratories, universities recover a slightly lower percentage of total research costs as F&A and receive no profit margin. Differences in F&A rates among institutions are attributed to historical, regional, and operational cost differences. Reductions in federal F&A reimbursements could negatively impact universities’ capacity to sustain research infrastructure, staff, and future scientific training, potentially leading to reduced research output or increased tuition. The document also addresses misconceptions, noting that federal F&A funds do not subsidize non-research university operations or foundation-sponsored research, and that foundation support, while valuable, constitutes a small portion of overall research funding. Ultimately, the document underscores that adequate federal support for F&A costs is vital to maintaining the excellence, safety, and competitiveness of the U.S. academic research enterprise.
